European and External Relations Committee, 20 Dec 2005

Meeting date: Tuesday, December 20, 2005

Official Report 238KB pdf

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Structural Funds

Agenda item 2 is on the implementation of structural funds in Scotland, which the minister has kindly agreed to discuss with us. I am pleased to welcome Phillip Raines and Diane McLafferty from the structural funds division of the Scottish Executive Enterprise, Transport and Lifelong Learning Department.

As I understand it, the budget deal that was agreed by the European Union last Friday means that Scotland will still receive structural funds during the 2007-13 period, albeit at a reduced level. Perhaps the minister will be able to confirm exactly what Scotland is likely to receive.

I thank the minister for agreeing to appear before the committee. The main reason for our inviting him was to discuss how the Executive proposes to deliver the new round of structural fund programmes in Scotland. I understand that planning for those programmes is well under way and that the Executive proposes to change the current structure for managing them. Today's meeting enables us to ask the minister why he thinks that such a change is necessary.

I invite the minister to make an opening statement.

In the immediate aftermath of the decisions that were taken over the weekend, it is good to have the opportunity to update the committee on the future of structural funds. We are clearly in a better position to fill you in on the outcome of the European Council, because we now have an agreed deal. However, it is equally clear that we still have to work through the exact implications for funding.

I will elaborate on a number of the headline points. The first proposal preserves much of the United Kingdom rebate, which is good news for Scotland. A large increase in UK contributions to the budget would have pinched our domestic expenditure and impacted on the Scottish block.

Secondly, the deal means continuing structural funds receipts for the whole of Scotland. In the different scenarios that were considered over the piece, that was not always going to be the case. We are calculating the exact number, but overall we could receive about 40 per cent of what we receive currently. That includes funding for the Highlands and Islands as a statistical effect region under the convergence objective and funding for lowlands and uplands under the competitiveness objective.

We need to push ahead with future programming. As members of the Scottish European structural funds forum, the convener and deputy convener know that in June we set out our proposals for future programmes, which included a proposal for four mainstream programmes in Scotland—single European social fund and European regional development fund programmes for the Highlands and Islands and for lowland and upland Scotland. Those programmes will need to focus on our domestic priorities. With less funding available and with pressure from the Commission to concentrate EU resources on areas in which they will have the most beneficial impact, it is essential that our structural funds complement and add value to our domestic programme for economic development.

We believe that the system for delivery of structural funds needs to change. The convener made passing reference to that. Most would agree that our Scottish model has served us well, but given the sharp reduction in funding we must re-examine whether the current approach is still fit for the purpose for which it was designed. With less funding, for example, we will need fewer than the five current programme management executives.

For that reason and others, we have commissioned consultants to research how the programmes are delivered in other countries. We are particularly interested in finding out how co-financing as a concept could work in a Scottish context. That means using the existing delivery channels to deliver some or, prospectively, all of the EU funding. That would undoubtedly reduce the administrative burden on the applicants, which is one of the reasons why it is an option, and thereby maximise the potential value to the recipients of the structural funds. It could, of course, also complement domestic funding and overcome some of the historical issues that surround match funding.

At the same time, we will talk to partners about their views on future programming and delivery arrangements. Four stakeholder events are being held in Scotland; one has already taken place in Inverness and another three are scheduled to take place in January. After those events, we will review how to progress.

At this juncture, and to make the committee fully aware of the facts, it is important to stress that no decisions have been taken on all or any of that. I am extremely open minded and receive delegations almost weekly from partners, regions and elsewhere. I listen to what they say about how they think their interests will best be served in future programming decisions.

That is where we are, and I am happy to answer any questions that members might have.

Thank you, minister.

My initial question is one of concern. I am particularly interested in what you said about no decisions having been taken yet. The reduction in funding from the previous round is quite a cut. I note that you are doing research into the different methodologies that might be used. I understand that the Executive first said that it would start doing such research about two years ago, but the issue is still on-going. I am concerned that the new round does not start until January 2007, which is a year away. That is a long run-in time for many projects, which will create a lot of uncertainty for people who are trying to get projects—particularly large infrastructure projects—up and running.

When will the research be finished? When will you make those decisions? Do you share that concern about how little time is left?

The consultation process is important, and it would not be right for us to make decisions on future programming methodologies without it. Since I took this job, I have thought it right that we look at what happens elsewhere and that our internal debate should be informed about what works in other parts of Europe. Changes are occurring in the administration costs of the existing programmes. We should have the consultants' report by the end of January, and the stakeholder events will run concurrently. We will then be in a position to put forward our views, and I hope that a consensus will emerge that will enable us to implement a new programming process. That will take effect in the new programme period, which of course starts at the end of next year.

Are you confident that in that fairly short timescale there will be sufficient co-ordination and that a strategy will be in place to allow a smooth transition to a changed system?

The EU budget deal has helped matters. Many commentators did not predict that deal, but expected the uncertainty to continue into the Austrian presidency and perhaps beyond. The EU deal is good news and is a positive development for our ability to deliver on the programmes in the next financial perspective.

You indicated that the Highlands and Islands will qualify under the statistical effect for the convergence element of the structural fund and that overall Scotland will get 40 per cent of what it currently receives. How will that 40 per cent be spread across Scotland? Will the Highlands and Islands get that 40 per cent or will they get much the same as they do now, meaning that the rest of Scotland will receive less?

The Highlands and Islands will get approximately 60 per cent of what they got in transitional funding by virtue of their complying with the convergence criteria. The overall coverage for the rest of Scotland is 40 to 45 per cent. The actual delineation of what that amounts to has still to be determined. We are obviously continuing discussions with the UK Government about that.

You indicated that the rest of Scotland qualified as part of the competitiveness objective. Given that, do any particular measures directly address competitiveness?

Yes; in concert with economic development being a top priority in our domestic programme, we have identified innovation in enterprise development, community regeneration, and environmental and rural sustainability as key features of the next ERDF programmes.

Do those programmes focus more on the three issues to which you have just referred or do they have more of a geographical slant?

Given that we have reduced receipts, I am sure you agree that it is important that they are focused on our priorities. As I said, those priorities will be innovation in enterprise development, the Lisbon agenda, community regeneration, closing the opportunity gap, which is a key Executive priority, and environmental and rural sustainability, with general concentration on the sustainability agenda.

Those three strands will have more impact than any simple geographical split. I am sure that members would agree that it is more important that we concentrate on adding value through structural funds than on anything else. As members know, structural funds account for only 4 or 5 per cent of economic development spending, so it is important that they should add value to the process and complement other forms of spending.

The Executive and, before the Executive was set up, the Scottish Office have never been very active in attracting funds through Interreg, which is due to finish at the end of next year. The Commission has proposed a new co-operation objective, under which funding might be available for projects involving co-operation between different member states of the European Union. Is the Executive actively looking into the possibility of Scotland attracting funds for such projects? In the past, we seem to have been sleeping.

I do not accept your criticism that in the past we have been sleeping. Recently I went to a conference in Latvia at which, with the commissioner, we looked at developing new international co-operation programmes. The Scottish Executive was proactive in explaining to the emerging countries of the east how we used Interreg programmes to assist in funding international co-operation programmes in the North sea, north-west Europe and the Atlantic area more generally. We have been proactive in the past. We have also been keeping a close eye on what has been happening to the co-operation objective. Funding for the objective has been reduced, but it is still intact as a strand. We anticipate that there will be opportunities for the west of Scotland to take advantage of programmes internationally—for example, with Ireland.

I was going to mention Ireland, because the Republic of Ireland is our closest neighbour in the European Union. However, to my knowledge, Scotland has never had an Interreg programme with Ireland. Wales has had such a programme, so it is possible for a devolved Administration to have very good projects involving co-operation with the Republic of Ireland. I suspect that people in the Scottish Executive and the Scottish Office before it did not realise that Scotland, too, might have been able to qualify. However, that is water under the bridge—we must now look ahead.

The Commission's proposals for the new co-operation objective stipulate that, where cross-border co-operation involves a sea border, there should be a maximum distance of 150km between the two relevant coastlines. The distance between the south-west of Scotland and some of the islands and the north-west tip of the Republic of Ireland is less than 150km, so would it not be possible to have projects involving co-operation between the devolved Administration here in Scotland, the devolved Administration in Northern Ireland—when it is re-established—and the Government of the Republic of Ireland? We could have tripartite co-operation and the strong possibility of attracting European Union funding for such projects.

I agree with the general thrust of what you are saying. I reiterate that it is not correct to say that we have not taken advantage of the provisions in the past. We have four programmes: for the North sea, for north-west Europe, for the Atlantic area and for the northern periphery.

But there are no programmes with Ireland.

No—I am coming to Ireland. We think that all the programmes that I have mentioned can benefit from future support; it is important that we continue them.

We have calculated that, because of the more flexible criteria to which you referred for maritime borders, parts of Scotland that have hitherto been ineligible—Dumfries and Galloway, south Ayrshire, Argyll and the isles and, provisionally, east and north Ayrshire—can expect to be involved in an international programme for the first time. As well as examining how the new objective will affect existing programmes and their continuation, we can consider cross-border initiatives and potentially bring south-west Scotland into a programme with the Republic of Ireland. About €18 million could be available for a Scotland and Northern Ireland programme.

Is somebody or a team of people in the Executive looking at the potential for such co-operation here and now?

Yes. We are in discussion with colleagues in the Republic of Ireland and Northern Ireland about the scope for projects that build on the programme that they have worked with and about whether Scotland can contribute.

Good. Thank you.

The minister will recall that the committee conducted an inquiry into and produced a report on structural funding. At that time, I was the lone voice in support of the Government's budgetary ambitions. Somehow, the Government has fallen into a halfway house with the budget settlement that has been made. When the committee did its inquiry, one reason why I was persuaded of the Government's position was that the Chancellor of the Exchequer had said that, although he foresaw a considerable reduction in structural funding for Scotland, he would basically prefer a renationalised system and to find additional funding to fill the gap. Is the chancellor intent on fulfilling that commitment?

The UK Government gave that commitment in the event that its budgetary position prevailed in the EU negotiations, which of course it did not, because it did not have sufficient support. I admit that I always took the view that repatriation of structural funds was our optimum solution because, with the Treasury guarantee, we would in effect have had more money to spend, or at least the equivalent amount as under structural funds—depending on the next gross domestic product figures—which we could allocate domestically.

That was the optimum solution, but it did not materialise. We now have an agreed deal, which does not incorporate a Treasury guarantee. The net increased contribution that we will have to make as a result of the reduced rebate will be factored into the UK Government's next financial spending review and the next discussions on the Scottish block.

If Scotland had had a net increase in structural funding, only to lose the same amount or more from our block grant as a consequence of an increased net contribution from the UK Government, that would not have benefited us at all.

That is more or less my reading, although it is not what I wanted you to say. You referred to a reduced block grant. The use of much structural funding is based on match funding. How will the reduction in the block grant affect match funding?

I do not know whether the block grant will be reduced. We know that receipts for structural funds will be reduced, so there will be less money to go around. That might mean that organisations' ability to match fund contributions is more problematic, hence the suggestion that co-financing might in some instances be a more efficient way to deliver the programmes and the priorities that we have chosen. That would preclude the need for match funding in a meaningful sense.

Will the minister say a little more about the Executive's thinking on the management of the scaled-down programme? I presume that the arrangements for the Highlands and Islands will stay the same, but we now also have the west, the south and the east. I confess that, at the beginning of the meeting, I had to ask which area my constituency of East Lothian came into. That shows how much impact the question has had on me over the years.

It is definitely not in the west.

I appreciate that the question is of rather academic interest.

It probably would not make sense to keep three separate structures. In his opening statement, the minister referred to the Highlands and Islands and, interestingly, lowland and upland Scotland. I do not know whether he is moving towards making a distinction between lowland and upland Scotland.

At the moment, we have five programme management executives. The proposition is that, because of the reduced funding, we should reduce the number of PMEs. I have proposed that there should be one for the Highlands and Islands and one for lowland and upland Scotland. I will explain my rationale for that, and Diane McLafferty will correct me if I have got my facts wrong. It costs something like £15 million to administer the programme management executives. We all know the value of the bottom-up approach that they encapsulate but, in a period of reduced funding, would we necessarily want to replicate that £15 million cost in the next programme management funding? Arguably not.

Quite right.

That is especially true when there is a change in the voluntary management contribution. Some rationalisation is required. Co-financing could play a part in that, as could having one or more programme management executives in the lowland and upland area.

I am open to all arguments. I constantly hear arguments from the regions of Scotland about where they think their interests lie. We will take on board the views from consultations at stakeholder events. I hope that we will reach consensus on the best way of delivering the money that we have and that we will not just hear the vested interests of the different parts of Scotland.

It sounds to me as if you are on the right track.

I support the minister's view that we have to reduce the number of programme management executives, because that will reduce bureaucratic costs and free resources that can then go to front-line services. For administrative costs for five executive structures, £15 million is an astonishing sum of money.

I always support greater efficiency if it frees resources for front-line services, but I worry about loss of local accountability. However, I do not think that it could be argued that these rather obscure programme management executives are well known. Nevertheless—and although you say that most of the procedural decisions are still up for grabs—in a co-financing scenario you would rely on public organisations, local authorities and other parts of the public sector to take forward the procedures.

In the Clyde valley, eight local authorities are doing community planning at a strategic level. At the moment, the programme manager for Strathclyde European Partnership comes along and interfaces with the local authorities at a strategic and, if necessary, operational level. If we move towards having something as vast—and, to be frank, nebulous—as "lowland Scotland", there will not be the same political accountability, even indirectly. There has to be some kind of accountability.

If you do not mind my saying so, you are right on the button. Programme management executives have served us well by taking a bottom-up approach and, if you like, by reaching into parts that other public agencies have historically found it difficult to reach into.

However, we are moving into a new era. Charlie Gordon mentioned community planning partnerships. It will be interesting to see what the consultation process produces, but such partnerships are prospective recipients of co-financing. Indeed, I will be interested to hear whether you agree that, by giving partnerships direct access to structural funds and the power to match them locally to develop programmes, we will cut out the middleman and some of the local delivery and accountability problems that you have mentioned. That said, people might well argue that, to maintain the bottom-up approach, programme management executives should continue with some or all of their functions in different localities.

I agree with the minister. For example, the Clyde valley community planning partnership has already demonstrated that it can apply funds strategically by administering the city growth fund for the Glasgow city region. As the minister has implied, the partnership is a lean, mean machine. I am very keen on stripping bureaucracy to a minimum and getting maximum funds—and the additional leverage that they provide—to the front line.

As members have rightly pointed out, these matters must be addressed at a strategic level with everyone working together. In the past, people expressed concern that there was no overall strategy. I know that the UK is currently consulting on a strategic structural funds framework, but will relevant stakeholders be consulted on its Scottish chapter?

Yes, that is our intention. I am happy to make the Scottish chapter available to the committee. It contains nothing that would surprise members and, as I have made clear, it is entirely consistent with what we have said domestically about the priorities of enterprise, growth, innovation, environmental and rural sustainability and closing the opportunity gap. I am happy to share that information with members.

I totally understand Charlie Gordon's point about the advantages of changing our thinking and, indeed, the thinking of others. However, it has been suggested in other places that when one moves away from what you call the bottom-up approach towards co-financing, some sectors that traditionally did well begin to do badly. The obvious example in which I have an interest is the voluntary sector. I have not really understood the theory about why it happens, but it has been well reported that sectors that have previously been successful in accessing funds somehow lose out as a result of such changes. Why does that happen? What can we do to ensure that, in making these changes, we do not throw out the baby with the bath water?

Your point is well made. If I thought that the voluntary sector would lose out in the change to co-financing, I would not support such a move. However, although there was a suggestion from England that the voluntary sector had lost out, other evidence suggests that that has not happened. Indeed, the independent consultants' report was commissioned to provide informed views on precisely that question.

The third sector can play a very important role in delivering outcomes. For example, with regard to employability, the voluntary sector provides programmes that would not exist if they were left to public agencies such as the local authorities, Scottish Enterprise or Communities Scotland—which, after all, would all be potential net beneficiaries of co-financing. Correct me if I am wrong, but there is no reason why we could not have a co-financing model that is based on voluntary sector outputs.

So you are conscious of the issue—I was just putting it into the pot.

We are very conscious of it. A classic example is voluntary sector activity that secures employment opportunities for people with learning disabilities. I am sure that that activity would not take place through existing public agencies, but it is potentially deserving of future support.

It has been almost assumed in the questions that the programme delivery in the Highlands and Islands will remain much as it is, notwithstanding the changes elsewhere. Is that the case, or is it proposed to reform the delivery mechanisms in the Highlands and Islands to try to gain efficiencies, given that reduced funds will be available? What will be the implications of the new set-up for European social fund programmes? Will a pan-Scotland approach be taken, or will the approach in the Highlands and Islands be separate from that in the rest of Scotland?

I will answer the last one first. The proposal is for two ESF programmes: one for the Highlands and Islands and one for the lowlands and uplands. Our proposals for the reform of the ERDF delivery mechanism are pan-Scotland, but that is subject to consultation. We could have a hybrid model or models, or we could maintain structures in the Highlands and Islands that are separate from the structures that are developed elsewhere. The current proposals for reform of the ERDF delivery mechanism are pan-Scotland. For the ESF, we propose two programmes—one for lowlands and uplands Scotland and one for the Highlands and Islands.

You referred to the Lisbon agenda. A lot of hand wringing has been done recently about the poor economic performance of Europe as a whole and the fact that we are nowhere near reaching the Lisbon agenda targets—in fact, we are going backwards. Given the reduction in structural funding, should we not ensure that the application of the funds results in genuine economic improvement in the country's performance? Should we not emphasise economic improvement?

I agree fundamentally. To repeat, in the future domestic programming objectives for the structural funds, the priorities will be innovation and enterprise development, community regeneration and environmental and rural sustainability. Those objectives are common throughout the EU but, as the challenges become more pressing the further east one goes, it is right that structural funding should be devoted to the development of the eastern European economy to allow it to catch up with that of the rest of Europe.

Does that not conflict just a little with the talk on social funds and the voluntary sector?

No, I do not think that it does and I do not think that David Cameron thinks that it does, either.

David Cameron has his own views. I will consider your words carefully when I read the Official Report of the meeting, because there seemed to be an element of conflict in them.

I want to return to strategic issues. We often talk about a bottom-up approach, but we also need a top-down approach to ensure that strategic action is taken. What will you do to ensure integration of action between and across structural funds, by which I mean between urban and rural areas and between sectors within those areas?

As I have discussed, co-financing has the potential to deliver such partnership working and remove some of the uncertainty that projects have historically experienced about their ability to raise the funding to match the European element. Community planning partnerships have an important strategic role to play in that process irrespective of what we decide on co-financing.

Beyond that, "The Framework for Economic Development in Scotland", "A Smart, Successful Scotland" and our plans for infrastructure and transport investment all charge our agencies with co-operative working towards those common objectives. Those are the principal mechanisms that I envisage will be brought into play. We have the national strategies, such as those that I mentioned, and we charge our partners—whether Scottish Enterprise, Highlands and Islands Enterprise, Communities Scotland or local authorities and, below that level, community planning partnerships—to add value to the process and collaborate to ensure that the money is spent to best effect in the locality. That, to me, is a coherent, strategic approach to the matter.

I think that you said earlier that co-financing would be appropriate in some instances, which suggests to me that it would not be appropriate in totality. What would the other instances be and would there still be an element of challenge funding?

You ask me to prejudge the outcome of the consultation exercise. I have a genuinely open mind on the matter. We might opt ultimately for an entirely co-financed model, some hybrid proposition or the retention of five programme management executives. Those are all options and I am not about to say that I favour a certain option over another at this juncture, because that would be unfair to the consultees.

Okay, that is fair enough, but I return to my initial concern about the fact that we are only a year away from the new tranche of money kicking in and the implementation of new funding. If the established structures are not in place a year from now and new structures have not been set up in time, will there be some form of interim financing for projects that are at the planning stage already and are moving on?

I also have a question about N+2 funding, which allows late financing at the end of a project if there have been problems—I think that it is going to be called N+3 funding. When will timescales for that kick in; will it be in January 2007 or when a project starts? It might not be the provider's problem that a project does not start when it should.

The two things are quite different and we should not confuse them. N+2 will continue for existing programmes, which means that we must ensure that the money is spent by the end of this calendar year and, prospectively, the end of next calendar year, which will pose extreme challenges to some of the programme management executives because, if it cannot be done, we will lose that finance.

I hope that you do not mind my saying so, but you are taking an unduly pessimistic view of our ability to deliver new programme methodology between now and the end of the current financial perspective. I take the opposite view—my glass is usually half full rather than half empty. The consultation will conclude at the end of next month, stakeholder forums will take place between now and then, and we will have a number of bilateral meetings with partners. I hope that, thereafter, consensus will emerge and that, in conjunction with existing programme management executives, we will be able to review the existing structure and decide on a new structure well in advance of the timescales about which you are worrying. The programme management executives are already collaboratively considering future structures, which is a positive development; they are speaking to one another about how they might deliver future programmes.

Maybe I am just a natural worrier.

Maybe.

She has a lot to worry about.

That is indeed the case.

I am sure that you will be disappointed to hear that there is something else about which I have great concerns. We face a reduction in funding from the last tranche. My concern relates particularly to the lowland and upland areas of Scotland—I know that there are economic issues for the south of Scotland and for the Borders. Is that a concern for you? Will you ask the UK Government to make up any shortfalls in structural funding? Will the money that is being expended in the next round be spent along the lines of Executive priorities, or do you see it as completely additional to the money that a Government should spend on major infrastructure projects?

I acknowledge that there are serious concerns across Scotland, whether they are expressed by people in the Highlands and Islands who face a 40 per cent reduction in their structural fund allocation or by people in the lowlands and uplands, where there will be an even greater reduction.

However, most of our partners out there are resigned to the prospect of the reduction. Some time ago, they saw the way in which the European budget was developing. Everyone anticipated the reduction—some more than others—but I repeat that the funding in question is only 4 per cent or thereabouts of total economic development spend. Our priority must therefore be to get maximum value for the 4 per cent.

Economic development remains our top priority. If we saw that there was a prospect of our economic development ambitions being harmed by a reduction in structural fund receipts, I am sure that the Scottish Executive and, indeed, the UK Government would ensure that its budgets are deployed in such a way that they maximise the potential for economic development. That process will take place in the UK Government and Scottish Executive spending reviews. It is not something on which I can give you any reassurances today.

Okay.

We are talking about reductions in spending, but the reason why the Highlands and Islands qualifies for convergence funding as a statistical effect region is that its GDP is less than 75 per cent of that of the EU 15. For years, every Government and local members have campaigned to get European funding. However, I well recall the time when the Highlands and Islands first qualified for objective 1 funding. At that time, the chair of the Highlands and Islands Development Board said that the objective of objective 1 funding was to get out of objective 1. Does the minister agree?

Precisely. The rationale for the reduction in structural support is precisely that we are growing the economy of the Highlands and Islands. It is because we are providing economic and employment opportunities that there is net migration into the Highlands and Islands, rather than the emigration that there was historically. I agree with the proposition.

How long will it take?

I repeat that I hope that this year we will agree on how to spend the structural fund receipts in the best possible way, so that we get most added value and economic benefit, whether in the Highlands and Islands or lowland and upland Scotland.

Thank you for your responses to our questions. Once members have mulled over what has been said and have read the Official Report of the meeting, I am sure that further questions will come to mind. Are you happy for us to put any such questions to you and ask for answers?

Yes. If we can give you more information, we will do so. I am thinking about the research funding situation, which is pertinent to the last question. We will also bring the committee up to date with the final figures as soon as we can.

Thank you.

Meeting suspended.

On resuming—

Do members have views on how we should proceed? Although the minister thinks that I am very pessimistic, I have concerns about what will happen in lowland and upland Scotland—the rest of Scotland—and especially about what will happen in the south of Scotland which, it seems to me, will take a bit of a hammering. I am surprised that the committee has received no approaches from people who are currently working in the area of European funding.

It is early days for them to react to the budget. However, there was plenty of reaction when we were writing our report on regional development funding. Everyone and their auntie gave a response to the committee. At present, the circumstances are fairly fluid. Nothing is happening now that was not foreseeable some time ago. It all depends on the budget settlement. We have had an intermediate budget settlement, and there will be major changes in how the budget affects Scotland.

Towards the end of January, we will know the results of the consultation and how we are proceeding. That may be the time to think about gathering any more information that we require.

I am not sure that I share your concerns, convener, but I agree that the last item that we discussed with the minister seemed to be seen as being not at all urgent—it was floating away somewhere in the clouds. However, there is a degree of urgency, and I am sure that members agree with that. Anything that we can do to retain awareness will be helpful. When a minister says, "Give it a month or so and I will begin to have answers," the difficulty is that we have to give him that time. I have no reason to doubt that he will have answers, but I agree that the issue must be monitored really tightly, because there is some urgency to it.

We have known for a long time that something like this was coming, because of the discrepancy between eastern Europe and us. The problem is that the budget was agreed only a few days ago and it will take a bit of number crunching to figure out what it means where. In my view, the most interesting issue that the minister highlighted was the figure of £15 million for administrative costs.

That was over the period of the programme.

I presume so. It is a lot of money. I expect that, as we sit here, various people are busy writing papers in which they make the case for protecting their jobs, looking after their structures and so on. We will need to be prepared for that. The figure is alarming.

I was surprised that we had not already received that information.

Yes—it has come out of the blue.

Who would raise the matter with us?

The minister has invited me to attend one of the structural funds forums in January. That should be interesting, given that the decision on the consultation will be taken at the end of the month. Should we monitor the issue at the moment?

I strongly support the trimming of some fat from the £15 million that is spent on bureaucracy. That is more money that could help to address the shortfall that will come about because of the changes. I understand the concerns about a possible loss of influence and accountability.

Yes—there is an issue of local accountability.

People might think that if they lose influence, they will lose funds elsewhere or will not get as much as they would get otherwise. I was encouraged by what the minister said about considering the community planning option. Heretofore, there has been a lot of focus on community planning as a purely local partnering arrangement, but I think that there is a lot of mileage in what I would call strategic community planning.

The beauty of having a lot of community planning partners that are already substantial organisations in their own right, including local authorities operating together across their boundaries, is that they all have their own bureaucracies, so they do not need to employ another set of bureaucrats; they can use their own resources to administer the funds. The administrative costs can be kept down and more resource can be freed up for the front line. A balance must be struck.

Of course, there will be bureaucrats who are doing nicely, thank you, out of administering the various funds, who will write alarmist letters saying that the proposals will lead to a loss of influence or a loss of funds in certain areas. I can imagine council leaders and other leading figures in the public sector becoming more engaged in whatever the new processes will be and trying to set people's minds at rest about any loss of influence.

At the moment, there are five programme management executives, and they are not really all that accountable. We do not really know what they are up to.

The Highlands and Islands model is interesting. Because of the culture of that arrangement, and given the way in which it was set up, there is a forum across the local authorities in the area, which works very well. That is lacking in the rest of Scotland, where the different bureaucracies, if we can call them that, are fractured. It might well be a while before the culture changes in the rest of Scotland and allows similar arrangements to emerge.

We should bear in mind the fact that, 10 years ago, before the abolition of the regional councils, there was more political accountability. The programme management executives are part of the detritus, as it were, from that time. We cannot abolish the regions of Scotland as a spatial reality, although they have long since been abolished as a political reality.

Jim Wallace has something to say on that philosophical note.

This is an important issue. The ink is barely dry in relation to this matter and I suspect that one of the reasons why we have not heard any outcries is that, under certain scenarios, lowland and upland Scotland—and even the Highlands and Islands—might not be getting anything, so people might simply be relieved to be getting something.

I have a proposal to make, and we could perhaps take some soundings from the minister's office on when the right time to do this might be. We should not leave it too long, given some of the issues that you have raised, convener. There is a structural funds forum, and there could perhaps be a session to take evidence from some of the key stakeholders at an appropriate stage in the first quarter of next year.

Perhaps, yes.

When the picture of what is going to happen is clearer, we could get stakeholders' views on what is happening, and we could remind ministers of the importance of the issue and of the need to get things in place. That would keep them up to the mark.

That certainly seems sensible to me.

We have a nicer problem than we previously thought.

I will pick up on Charlie Gordon's theme of accountability. It will be said that doing away with the existing management structures will make things more remote and bureaucratic. Charlie Gordon is quite right: there is a role here for elected local authorities. There is also a role for us, in this elected Parliament and this committee, in picking up that responsibility. That might form part of the thinking for the future. If a tier of bureaucracy is to be taken away, it does not necessarily mean taking away a tier of accountability. We can grow into and fulfil the role ourselves, if necessary, along with our partners in local government.

Once again, I do not disagree with a word that John Home Robertson has said, nor do I disagree with Charlie Gordon's comments on bureaucracy. However, this is the European and External Relations Committee and we must consider the wider scenario and think about the fact that the budget will now be spread across many more countries in Europe, which will make matters more difficult and complex. I wonder whether there will be a reduction in bureaucracy; it is inevitable that a massive expansion in European bureaucracy will be needed to administer the wider funding.

Every silver lining has a cloud.

Do you wish us to hold an inquiry, Mr Gallie?

No, but perhaps some of the people who Charlie Gordon said might have concerns could find opportunities elsewhere. [Laughter.]

I think that we can draw the discussion to a close. We have some concerns, so we will keep a close eye on the situation and consider evidence-taking sessions once we know what decisions have been made and what will be implemented in the new year.

Phil Gallie may have a point but, in my experience, the German and, to a lesser extent, Austrian bureaucrats have already cornered the market in helping the new accession countries to administer their programmes and spend their money. It is an industry.

You may say so, Mr Gordon.